SEC accuses Binance US of failure to support probe, shifts focus to exchange’s custody arm

  • Court documents from Thursday show that the SEC says Binance US may be in violation of a consent order. 
  • The regulator has turned its attention to Binance’s custody arm Ceffu, alleging that Binance US is not supporting the probe. 
  • The US securities regulator says the custody arm is unregistered, and is likely being used to move assets overseas.

The Securities & Exchange Commission (SEC) has accused Binance US of violation of a prior consent order. According to a court filing released Thursday, the US securities regulator argues that the crypto trading platform has failed to cooperate with the ongoing probe over alleged unregistered securities offerings.

Binance’s native token, BNB’s price remained unaffected by the development in the lawsuit.

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SEC probe raises questions of prior court order violations

In June, the US securities regulator filed a lawsuit against Binance entities and founder Changpeng Zhao (CZ) with 13 charges. These include operating unregistered exchanges, broker-dealers and clearing agencies, misrepresenting trading controls and oversight on the Binance US platform and the unregistered offer and sale of securities.

Since then, the SEC has added to its charges as the lawsuit drags on. In a court order from Thursday, the financial regulator  raises questions on a likely violation of a consent order from Binance.US. A federal judge approved in June a consent order, based on a temporary agreement between the regulator and Binance US requiring that funds and assets are not moved offshore.

The government oversight agency believes that the exchange is in violation of this court order. The SEC suspects that Binance.US custody arm Ceffu is unregistered and the exchange is likely using this entity to move assets overseas, according to Thursday’s court documents.

In a September 12 filing, Binance.US addressed the SEC’s concerns over its custody arm. According to CZ’s exchange, the agency’s concerns are “much ado about nothing.” 

The contents of the unsealed filing read:

“…the limited discovery BAM has provided to date raises questions about whether Defendants are in violation of the Consent Order because Binance Entities, including a newly rebranded Binance Entity called “Ceffu,” appear to have control of Customer Assets through their role in the establishment of wallets and keys shards related to BAM Customer Crypto Assets and control of the AWS environment that hosts the wallet custody software and stores the keys for BAM company and Customer Assets…”

The SEC therefore seeks the court’s intervention to request discovery and determine whether customer assets are being safeguarded in line with the consent order, or if they are being moved overseas.

Binance’s native token, BNB, is changing hands at $212.90 at the time of writing. The token’s price is currently unaffected by the development in the lawsuit and holders await Binance’s response to the SEC’s latest accusation.

Bitcoin, altcoins, stablecoins FAQs

What is Bitcoin?

Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.

What are altcoins?

Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.

What are stablecoins?

Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.

What is Bitcoin Dominance?

Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.

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